iPad is coming, but where are the content deals?

The Wall Street Journal reports that, with the iPad arriving in stores and on doorsteps in just a few weeks, Apple is still "scrambling" to secure content deals for their magical and revolutionary new device. Why?

Apple hasn't yet reached a deal with many major TV producers on the price cut, these people said. Some are concerned a price cut could hurt their existing businesses, these people said, including jeopardizing the tens of billions of dollars in subscription fees they are paid by cable and satellite companies for their traditional TV networks.

At the same time, some magazine and newspaper publishers said they are hamstrung by several factors that could delay the apps they are developing for the iPad from being ready by the time of the device's release.

iBooks is the exception, but is it because book publishers are smarter, more desperate for the digital age, or just softened by existing devices like the Kindle? 9to5Mac provides our favorite answer to why TV and other companies aren't racing to embrace the iPad: they're self-destructively crazy (via the Viacom vs. Youtube lawsuit):

For years, Viacom continuously and secretly uploaded its content to YouTube, even while publicly complaining about its presence there. It hired no fewer than 18 different marketing agencies to upload its content to the site. It deliberately "roughed up" the videos to make them look stolen or leaked. It opened YouTube accounts using phony email addresses. It even sent employees to Kinko's to upload clips from computers that couldn't be traced to Viacom. And in an effort to promote its own shows, as a matter of company policy Viacom routinely left up clips from shows that had been uploaded to YouTube by ordinary users. Executives as high up as the president of Comedy Central and the head of MTV Networks felt "very strongly" that clips from shows like The Daily Show and The Colbert Report should remain on YouTube.

Viacom's efforts to disguise its promotional use of YouTube worked so well that even its own employees could not keep track of everything it was posting or leaving up on the site. As a result, on countless occasions Viacom demanded the removal of clips that it had uploaded to YouTube, only to return later to sheepishly ask for their reinstatement. In fact, some of the very clips that Viacom is suing us over were actually uploaded by Viacom itself.

Reader comments

iPad is coming, but where are the content deals?

The Viacom/Youtube spat, while amusing and stupid on Viacom's part, is completely irrelevant to any content deal problems Apple might be having. Mentioning it serves only to distract from any real discussion or investigation.

The Viacom case may not be directly related to Apple's current issues, but it was brought up to show the mentality that they're having to deal with.
Many studios and networks simply don't get it. They seem to think we owe them even more money for the perceived value and convenience of accessing content on a variety of devices. It's like how Hulu had to block Boxee (or try at least) because Hulu's rights only apply to Internet streaming and Boxee can be used to watch Hulu on a TV (which seems to ignore all HTPCs running normal computer OSes). If the ads are still there, who cares?
Why should I pay $2 for just one episode of the Daily Show via iTunes when I can effectively watch it for free on their own website on my Mac Mini connected to my TV (which gives better picture quality than the Comedy Channel on our local Comcast, which still doesn't have that channel in HD)?
In the end it's just greed. I have no problem with ads or paying a price that covers costs and provides a reasonable profit margin that can be used to invest in new content, but they're trying to keep a hold on their old business model while missing out on the whole digital distribution revolution.

It's certainly not true that all media distributors are trying to keep things the way they are. The reason book publishers are more inclined towards electronic distribution is because they think it will benefit them. Among the advantages are elimination of the sharing of books, cut outs, and used book sales, increased sales due to availability, as well as more central control over pricing and discounts. Among the disadvantages of e-books would be a lower profit margin per sale. Overall, the matter depends not just on having a business model which makes a profit, but also on how the companies already place a value on their products. TV content is generally valued according to the cost of production and the ability to generate interest from advertisers, whereas the direct to market value of TV content is a relatively new phenomenon. Like recording companies, serial video content providers already have the stance that they're losing huge amounts of money from piracy, which makes them less amenable to (let's face it) making smart decisions.

Soooo glad I didn't order one. I knew something was wrong and half-baked about it when I saw that the border was too thick around the screen and it didn't even have a camera for iChat. I think next year's will be the one to get, hopefully they will fix the size issue and add a camera, content etc.

@MrC
That's the problem -- not they are stupid (well, they might be, but that's besides the point), but that they do not see a path to money with the "digital revolution" or at least with iPad-specific content deals. Your Daily Show/Boxee/Hulu example has an analogues in just about every non-book medium -- why should I pay for the NYT on the iPad when I can get the same content for free on their web site? Why should I pay for South Park on the iPad when I can see it at southparkstudios.com for free?
The answer Apple has envisioned is that content creators can make new and interesting types of content on the iPad not possible on (newspaper|magazine|TV|web), but if the creator does not think they can recoup -- through increased ads or subscriptions -- the costs of creating that new and interesting content for the iPad, they won't make it. And if they don't create anything special for the iPad, people will just hit the website for (ad-supported) free, instead of paying for a subscription for an equivalent iPad version.
I think that has been Apple's evangelism challenge with the iPad -- convincing those creators that they need to be on the iPad now, creating tablet-based wonders, at launch. Perhaps some have been hard at work in secret, but the article suggests most have been a little cautious. While I do not think a lack of content producers will blunt the iPad's initial launch momentum, it is certainly something that would hurt that "3rd class of device" from breaking out to a sustained iPhone-level success.

Because they don't want to cave to Jobs they are self destructively crazy? Wow, that's fanboy with teeth!
When you look at how the app store has been a total financial BUST for 95% of the app developers out there, you might have to be crazy to accept Apple's first offer.
The smart money would wait. Apple is not a nice business partner if they think they can dictate terms.

@icebike: if you invoke "fanboy" then you become "hater" or "troll" and it makes it impossible to discuss. ;)
Ignoring that, Hollywood can and certainly is crazy absent any involvement of Jobs. Almost every business decision they've taken during the digital era has been anti-consumer and often against their own long-term interest. Things like DVDs and Blu-Ray under DMCA (never mind the insane ACTA), charging more for downloads then bonus-rich physical media, relentlessly fighting against personal use and content transportation, and countless other tactics -- including the bizarre YouTube behavior above -- shows an industry completely ignorant of their time and market.
If nothing else, iTunes has shown consumers will often pay a fair price for convenient access to fair digital content. Anything outside that has been a disaster for media. So, yeah, I'm sticking with crazy.

BTW- Apple not being a "nice business partner" when they dictate terms is a little funny. No business is "nice". They're all after their own interests or they go out of business. When interests co-incide, I supposed that's nice, but "mutually beneficial" would be a better term.
Let's take free/cheap apps for example. Apple bears transaction costs for free apps (and freemium when no in-app purchases are made), and we were told at GDC that transaction costs for $0.99 apps often work out to a loss. That's certainly "nice" for developers. (And I guess why they want Quatro Wireless to help monetize that).
But, yeah, Apple's to blame for everyone not making a fortune on the App Store, regardless of the quality of the app or the marketing they themselves put in (how do I roll my eyes in emoticon again?)

I'd like to briefly weight into this as both a consumer and a Hollywood content creator & producer.
As a consumer, I'm used to the TV model of "give it to me for free" and cable model of "give me unlimited access to more for a fee". The problem is that the cable providers pay millions in licensing fees (look at the recent TW/Fox dispute to understand better) and also recoup some of their money through regional advertising. The eyeballs for television are in the hundreds of thousands per region and it makes it cost-effective for advertisers to buy national media spots (Marketing 101).
From a producers perspective, there are still fewer viewers online. I am looking forward to the future where television is Internet-only and getting enough advertising funding to make a proper series is harder and harder to come by. This can be seen in the current state of WebTV. We get less advertising revenue, but still close to the same expenses for production. Actors still have to be paid (and royalties are more difficult to discern), sets need to be built, writers need to be employed, and I need to make enough money that I reinvest it into my company and the next production (there is a lot of work before a studio will sign a check).
So, I look at this and want my content affordable and easily accessible, but know that it's not just a perception, but a FACT that the studio makes less money. So, it's no longer an issue of being greedy and resisting the future, but trying to discover the "best of both worlds" where an online view pays me as much money to cover costs as a traditional airing. I assume you that things will change in five years, but this is still the awkward teenage years for Internet television.
Hope I was able to shed some insider perspective on this.

@Rene
I find it hard to believe that transaction costs for 99 cent apps work out as a loss. I find it easy to believe that you "were told at GDC" this is true by an a company with a vested interest in painting that picture -- the same entity that refuses to release any numerical breakdown even to those very business partners who need that information -- and that you believed it unconditionally.

It wasn't Apple or anyone involved with Apple in any way who explained the costs of transactions under the model, but someone in a real position to know so I found it highly credible, especially considering we've heard for a long time -- going back to the original iTunes music -- that Apple sold $0.99 songs at near break-even and typically waited to process charges in case users bought more than one item and they could bundle them into one charge to save on the fees.
Apple (and anyone using the 70/30 model, which more and more companies are now doing) gets $0.29 cents per transaction to handle processing, storage (which is servers, backup servers, offsite backups, etc.) bandwidth, marketing, developing and deploying storefronts/landing pages, legal and admin, cost of cutting cheques to devs for the other 70%, etc. and host of other charges.
That anyone doesn't believe the costs associated is, frankly, unbelievable.
Apple's also doing it internationally in 70 countries while other companies are just beginning to launch in Canada (Android) and a few other countries.